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Pensions

Financial planning is a year-round activity, but now is an ideal time to review your pension arrangements before the tax year-end deadline of 5 April.

Due to greater simplicity, choice and flexibility, pensions are an even more attractive choice for retirement savers than ever before. Moreover, the government rewards you for saving into a pension by giving you extra money in the form of tax relief.

Subject to certain limits, for every 80p you pay into a personal pension, the government adds 20p. However, higher rate taxpayers can claim extra tax relief through their annual tax return, meaning that a £1 contribution can effectively cost them just 60p.

There is a limit on the amount you can contribute to your pensions each tax year while receiving tax relief. This is based on your earnings and is capped at £40,000, although a lower limit may apply in certain circumstances.

However, provided the maximum contribution is paid by 5 April, you can go back and pay a contribution for any unused annual allowance you had in the previous three tax years. Substantial sums that qualify for tax relief can therefore be invested immediately without incurring a punitive tax charge for exceeding the annual allowance.

This year is the final chance for pension savers to use the allowance that was in place in 2014/15. If it is not used by 5 April 2018, it will be lost forever. To qualify, you must have held a pension in each of the years from which you carry forward, and you must earn at least the amount you wish to contribute in total this tax year.

Itís also possible to pay up to £2,880 each tax year into a pension for a non-earning spouse, or child; that sum will be automatically increased to £3,600 through basic rate tax relief. This tax-saving opportunity is lost if it hasnít been used by 5 April.

Remember also that pension contributions help you to bring your taxable income to below certain thresholds. This means that you may be able to control tax to some extent, how much of your income is subject to the higher and additional tax rates.

The value of an investment with St. James's Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.

The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.

The Partner Practice represents only St. James's Place Wealth Management plc (which is authorised and regulated by the Financial Conduct Authority) for the purpose of advising solely on the Group's wealth management products and services, more details of which are set out on the Group's website www.sjp.co.uk/about-st-james-place/our-business/our-products-and-services. The 'St. James's Place Partnership' and the titles 'Partner' and 'Partner Practice' are marketing terms used to describe St. James's Place representatives.